The media can be so clever. They have such creative ways to say things to trigger emotions in people to help a story gain traction. After all, if you can’t get the reader’s attention with the headline, you might not get it at all.

Trump tax-cut winners: the shareholder class

That’s a headline that recently caught my attention, and gave me pause.  (I’d link the story but it doesn’t deserve any more clicks.)

20171026_154902.jpgOh, my! The Shareholder Class? What complete nonsense, and complete misuse of the term. In the financial services world, “shareholder class” defines nothing more than the channel by which a shareholder purchases shares. Generally speaking, people in different shareholder classes pay different rates to invest in a security.

It seems the headline would like to have readers believe that those people who own shares belong to some sort of a class that the rest of us aren’t entitled to.  For those who bothered to read past the headline, it became clear that the “shareholder class” is not synonymous with the one-percenters who have been vilified in recent years.

Here’s a quote from the article:

There are a lot of middle-class families that own stocks, of course. The shareholder class includes virtually everybody with a 401(k), pension or other retirement plan that invests in public equities. That still represents a majority of Americans. Gallup’s latest survey shows that 54% of Americans have some sort of stock-market investment.

The chances are very good that you or somebody in your immediate family is part of the “shareholder class” as defined by the story.

Here’s some critical reasoning:

  1. If the shareholder class represents the majority of Americans,
  2. And the shareholder class will benefit from the tax cuts,
  3. Then the tax cuts will benefit the majority of Americans

Tax cuts will benefit the majority of Americans

Why wasn’t that the headline? Because it’s not trendy for the media to be direct or truthful. It’s all about impressions and clicks these days.

From my perspective, the article backslid even further by citing that fewer people owned stocks in 2017 than any time since 1999. Thankfully, a chart embedded in the post told a more complete story than did the text: 2007 was the year in which the highest percentage of people (65%) had investments in the stock market. No additional context was provided.

Gee, I wonder what happened after 2007. Oh that’s right, a virtual meltdown of the United States’ financial system and a 50%+ drop in the stock market. It was a period of such drastic economic turmoil that it earned the nickname “Great Recession.” During the same time frame, boomers began reaching retirement age; not exactly a stage of life when people take a lot of risk with their investments by pumping more money into stocks.

Could anyone really expect stock participation rates to not fall under these conditions? In the famous words of former President George H.W Bush, “It wouldn’t be a prudent thing to do.”

Even many of those people who pulled their money out of the stock market for fear of losing their life savings have likely begun to start putting some of it back in the market. If not, that’s their problem. There’s no reason people who have chosen to invest in the future of America should be lumped into any class other than “Smart”. According to the business school I went to, that’s Capitalism 101.

The takeaway:

Be diligent and be smart. If you see a headline that causes you to pause, dig into the facts a little bit and apply some reasoning. And may the truth set you free.